WISDOM, Circuit Judge.
In this diversity case the sole question on appeal is whether the work Liberty Welding and Iron Works, Inc. performed for Shell Oil Company on a heater treater was part of Shell's "trade, business, or occupation" for purposes of coverage by the Louisiana Workmen's Compensation Statute, L.R.S.A. § 23:1061. The district judge submitted this question to the jury. The jury found that the work was not part of Shell's "trade, business or occupation". We hold, as a matter of law, that the judgment must be reversed notwithstanding the jury's verdict.
Shell hired Liberty to replace the internal tubes of a steam generator or "heater treater" located at the Shell Central Facility at Southwest Pass, Louisiana. A heater treater is a device that is used to separate sand and salt water from freshly mined oil. During operation, the tubes inside the heater
Arnold and Demesia, employees of Liberty, were replacing the tubes in the Shell heater treater when they were injured. They sued Shell. Liberty Mutual Insurance Company intervened to recover compensation out of any judgment Arnold and Demesia might obtain against Shell. Shell filed a third-party complaint against Liberty Welding and Liberty Mutual, Liberty Welding's insurer, for indemnity against any claims by Arnold and Demesia. Liberty Welding answered the third-party complaint and cross-complained against Liberty Mutual. The district court granted Liberty Mutual's motion to dismiss the third-party complaint filed against it by Shell, but allowed Liberty Welding's third-party complaint against Liberty Mutual and its counterclaim against Arnold and Demesia to go to trial.
The case was tried before a jury on special interrogatories. The district court submitted the following issue to the jury: "Was the work for which Shell contracted with Liberty Welding Company part of Shell's regular trade, business, or occupation".
The jury found that Shell's contract work with Liberty Welding was not part of the oil company's regular trade, business, or occupation and awarded Arnold $11,000 and Demesia $1,350.
Section 23:1061 of the Louisiana Revised Statutes
Id. at 25-27. In the context of this case, we must decide whether, as a matter of law, the work that Arnold and Demesia performed on Shell's heater treater was part of Shell's own regular operations. If the work was part of Shell's regular operations, the sole remedy available to Arnold and Demesia was under the Louisiana Workmen's Compensation Laws and they could not maintain this suit.
Only one witness, B. O. Carlson, Division Production Superintendent of Shell Oil Company in New Orleans, testified at the trial on whether the work on the heater treater was part of Shell's regular business. He testified that Shell Oil operates throughout the entire United States in a myriad of activities, including finding, producing, transporting, refining, manufacturing, marketing, and selling oil and gas products. In the Delta Division, which encompasses the Central Facility where Arnold and Demesia were injured, Shell employed six crews at the time of the accident. Each crew
Carlson described the operations of the Delta Division. He stated that as oil and gas are mined from the earth some sand and salt water are always produced along with the oil and gas. This residue must be separated from the oil prior to the oil being placed in a pipeline that will carry it to a refinery. The separation takes place in a heater treater which requires some form of heat, usually provided by a steam generator. Carlson described the work Arnold and Demesia performed as "an expected repair". Demesia testified that replacing the tubes on the heater treater was routine work required on any such generator. Arnold agreed that the replacement of this tubing was to be expected in any similar boiler. Carlson testified, however, that Shell always contracted out its work on its heater treaters. There was no evidence bearing on the custom in the industry.
In deciding whether the work performed by Arnold and Demesia was part of Shell's trade or business for the purposes of workmen's compensation coverage, we keep in mind that the workmen's compensation law should be liberally construed with a view to coverage. It makes no difference that Shell, the employer, is the party asserting coverage. See Isthmian S.S. Co. v. Olivieri, 5 Cir.1953, 202 F.2d 492, 494; Thibodaux v. Sun Oil Co., La.App. 1 Cir.1949, 40 So.2d 761, 766, aff'd, 1950, 218 La. 453, 49 So.2d 852.
This Court has already held that a heater treater is part of the regular operations of an integrated oil company for purposes of section 23:1061 of the Louisiana Revised Statutes. Fontenot v. Stanolind Oil & Gas Co., 5 Cir.1957, 243 F.2d 574. In that case we affirmed summary judgment against Fontenot on the basis of the district court's opinion, Fontenot v. Stanolind Oil & Gas Co., W. D.La.1956, 144 F.Supp. 818. The district court stated:
The facts in Fontenot are remarkably similar to the facts in the instant case, with one exception. In Fontenot there was substantial evidence that the cleaning and repair of Stanolind's heater treaters was regularly performed by Stanolind's own employees; Stanolind only contracted out this work when none of its own employees were available. Here, however, Shell always contracted out this work. There is no question that Shell is a fully integrated oil company that is engaged in the production, saving, and marketing of oil and other
One of the earliest Louisiana cases construing section 23:1061 held that hauling steel pipe from one oil well to business. Seabury v. Arkansas Natural another was part of an oil company's Gas Corp., 1930, 14 La.App. 153, 127 So. 25, aff'd, 171 La. 199, 130 So. 1. The court in Seabury however, did not articulate the test it used in determining that this work was part of the business of Arkansas Natural Gas; it simply held that this work was covered. Later, the same court, in Dandridge v. Fidelity & Casualty Co., La.App. 2d Cir.1939, 192 So. 887, held that welders with whom an oil company contracted for the repair of oil production equipment were engaged in an activity that was part of the business of the company. In Dandridge, the court laid great stress on the fact that the welders were hired to perform repair work on equipment that was already installed and on the fact that the repair work could have been performed by regular employees of United Gas. The court went on to state:
The Louisiana courts in these two cases seemed to be developing a two-pronged test based on business necessity and employment of similar workers.
In Turner v. Oliphant Oil Corp., La. App. 2d Cir.1940, 200 So. 513, however, the court began to focus more on business necessity. In that case, the court held that an employee who was pulling casing from one of Oliphant's abandoned wells was engaging in Oliphant's trade or business, even though Oliphant did not do its own drilling or refining, but produced and sold oil. The court stated, 200 So. at 513.
Thibodaux v. Sun Oil Co., La.App. 1st Cir. 1949, 40 So.2d 761, aff'd, 1950, 218 La. 453, 49 So.2d 852, reinforces the reasoning in Turner. That case involved the death of Thibodaux and injury to Baker while they were working on Sun Oil's drilling rig. Both Thibodaux and Baker pleaded that their work was a highly specialized part of oil field work, not customarily done by Sun Oil. The district court sustained Sun Oil's exceptions of no cause of action, and the Court of Appeals affirmed.
This language does not say that the controlling question is whether the employer in fact had any employees engaged in similar activity. The test seems rather whether the employer would have to hire some workers of its own to perform the activity if it were not performed by the independent contractor; in other words, whether the activity was essential to the employer's business.
Our Court has clarified Isthmian in Massey v. Rowan Drilling Co., 5 Cir. 1966, 368 F.2d 92. Massey was employed as a welder by Gulf Oil Field Service Company, an independent contractor. Gulf was hired by Rowan Drilling Co. to repair a high drum chain guard on the draw work on one of Rowan's drilling rigs. In the course of performing the repairs, Massey slipped on a greasy floor and was injured. Massey sued Rowan. The district court granted Rowan's motion for summary judgment and we affirmed. In his appeal to our court Massey argued that the work he was performing was special work not generally done by others engaged in Rowan's business and thus it was not part of Rowan's trade or business under the Louisiana Workmen's Compensation law. We rejected Massey's interpretation of the Louisiana law and held:
We regard Massey as correctly stating the Louisiana law, in the light of Thibodaux and Turner, that the test for determining whether an activity is part of an employer's trade or business for purposes of the Louisiana Workmen's Compensation Statute is whether the particular activity is essential to the business. The fact that the employer or the industry as a whole always contracts out the activity is not controlling. This business test clearly carries out the purposes of section 23:1061 — to prevent subversion of the workmen's compensation laws by an employer contracting out part of his business. If the test under this statute were whether the employer had any employees engaged in similar functions, the employer could easily subvert the statute by contracting out all of the various parts of his business. For example, if the employer were an integrated oil company, he could contract out all his drilling activity, pipeline construction and maintenance, refining, and petrochemical processing and virtually eliminate workmen's compensation coverage leaving the workers to collect from a possibly insolvent contractor. Under the essential-to-the-business test, however, all these activities would be covered and the purpose of the statute to interpose the solvency of the oil company between the worker and the contractor would be carried out.
We hold that the district court erred in refusing to grant Shell's motion for judgment notwithstanding the verdict.
The judgment below is reversed.